Identifier
Created
Classification
Origin
06BUENOSAIRES2767
2006-12-18 16:55:00
UNCLASSIFIED
Embassy Buenos Aires
Cable title:  

ARGENTINA 2006-2007 INCSR PART II: FINANCIAL

Tags:  EFIN KCRM KTFN PTER SNAR AR 
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PP RUEHWEB

DE RUEHBU #2767/01 3521655
ZNR UUUUU ZZH
P 181655Z DEC 06
FM AMEMBASSY BUENOS AIRES
TO RUEHC/SECSTATE WASHDC PRIORITY 6773
INFO RUEHAC/AMEMBASSY ASUNCION PRIORITY 5799
RUEHBR/AMEMBASSY BRASILIA PRIORITY 5655
RUEHMN/AMEMBASSY MONTEVIDEO PRIORITY 6012
RUEAIIA/CIA WASHINGTON DC PRIORITY
RUEABND/DEA HQS WASHINGTON DC PRIORITY
RHMFIUU/DEPT OF HOMELAND SECURITY WASHINGTON DC PRIORITY
RHMFIUU/DEPT OF JUSTICE WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC PRIORITY
RHEFDIA/DIA WASHINGTON DC PRIORITY
RHMFIUU/HQ USSOUTHCOM MIAMI FL PRIORITY
RUCPDOC/USDOC WASHINGTON DC PRIORITY
UNCLAS BUENOS AIRES 002767 

SIPDIS

SIPDIS

STATE FOR INL, WHA/BSCD, EB/ESC/TFS
JUSTICE FOR OIA AND AFMLS
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: EFIN KCRM KTFN PTER SNAR AR
SUBJECT: ARGENTINA 2006-2007 INCSR PART II: FINANCIAL
CRIMES AND MONEY LAUNDERING

REF: STATE 157000

a. The following is Embassy Buenos Aires' input for the
2006-2007 International Narcotics Control Strategy Report
(INCSR) part II -- Financial Crimes and Money Laundering.

Begin Text:

Argentina is neither an important regional financial center
nor an offshore financial center. Money laundering related to
narcotics trafficking, corruption, contraband, and tax
evasion is believed to occur throughout the financial system,
in spite of the efforts of the Government of Argentina (GOA)
to stop it. The financial sector's gradual recovery from the
2001-02 financial crisis and post-crisis capital controls may
have reduced the incidence of money laundering through the
banking system. However, transactions conducted through
non-bank sectors and professions, such as the insurance
industry, financial advisors, accountants, notaries, trusts,
and companies, real or shell, remain viable mechanisms to
launder illicit funds. Tax evasion is the predicate crime in
the majority of all Argentine money laundering
investigations. Argentina has a long history of capital
flight and tax evasion, and Argentines hold billions of
dollars offshore, much of it legitimately earned money that
was never taxed.

The GOA took several important steps to combat money
laundering in 2006, including enacting amendments to its
money laundering legislation (Law 26.087) on March 29, 2006,
empowering Argentina's Financial Intelligence Unit ("Unidad
de Informacion Financiera" or "UIF"),creating a new National
Coordination Unit in the Ministry of Justice and Human Rights
to oversee and manage overall GOA money laundering efforts,
and creating a Special Prosecutors Unit within the Attorney
General's Office for money laundering and terrorism finance
cases. In addition, the Central Bank of Argentina (BCRA)
completed plans for a specialized bank examination unit,
announced in 2005, devoted specifically to money laundering
and terrorism finance.

These positive actions followed the steps the GOA took in
2005 to improve the effectiveness of its money laundering
regime, including the ratification of the UN International
Convention for the Suppression of the Financing of Terrorism
and the Inter-American Convention Against Terrorism, and
regulatory changes to improve its anti-money laundering and
counterterrorist financing systems. The Central Bank of
Argentina expanded its requirements for financial
institutions to check transactions against the terrorism
lists of the United States, European Union, Great Britain,
and Canada, in addition to the UN 1267 Sanctions Committee
consolidated list.

Argentina's primary anti-money laundering legislation is Law
25.246 of May 2000. Law 25.246 expands the predicate
offenses for money laundering to include all crimes listed in
the Penal Code, sets a stricter regulatory framework for the
financial sectors, and creates the UIF under the Ministry of
Justice and Human Rights. The law requires customer
identification, record keeping, and reporting of suspicious
transactions by all financial entities and businesses
supervised by the Central Bank, the Securities Exchange
Commission ("Comision Nacional de Valores" or "CNV"),and the
Superintendent for Insurance ("Superintendencia de Seguros de
la Nacion" or "SSN"). The law forbids the institutions to
notify their clients when filing suspicious financial
transactions reports, and provides a safe harbor from
liability for reporting such transactions. Reports that are
deemed by the UIF to warrant further investigation are
forwarded to the Attorney General's Office.

As of October 31, 2006, the UIF had received 2174 reports of
suspicious or unusual activities, forwarded 136 suspected
cases of money laundering to prosecutors for review, and
assisted prosecutors with 107 cases. There have been only
two money laundering convictions in Argentina since money

laundering was first criminalized in 1989, and none since the
passage of Law 25.246 in 2000.

On March 29, 2006, the Argentine Congress passed Law 26.087,
amending and modifying anti-money laundering Law 25.246, in
order to address Financial Action Task Force (FATF) concerns
regarding the perceived inadequacies in Argentine money
laundering and terrorism financing legislation and
enforcement. FATF conducted a mutual evaluation of Argentina
in October 2003. The mutual evaluation report was accepted at
the FATF plenary in June 2004 and at the plenary meetings of
the Financial Action Task Force for South America (GAFISUD)
in July 2004. While the evaluation of Argentina showed the
UIF to be functioning satisfactorily, it identified
weaknesses in Argentina's current anti-money laundering
legislation, as well as the lack of terrorist financing
legislation or a national anti-money laundering/counter
terrorism finance coordination strategy.

Law 26.087 responds to many of FATF's criticisms. It makes
five substantive improvements to existing law:
UNCLAS BUENOS AIRES 002767

SIPDIS

SIPDIS

STATE FOR INL, WHA/BSCD, EB/ESC/TFS
JUSTICE FOR OIA AND AFMLS
TREASURY FOR FINCEN

E.O. 12958: N/A
TAGS: EFIN KCRM KTFN PTER SNAR AR
SUBJECT: ARGENTINA 2006-2007 INCSR PART II: FINANCIAL
CRIMES AND MONEY LAUNDERING

REF: STATE 157000

a. The following is Embassy Buenos Aires' input for the
2006-2007 International Narcotics Control Strategy Report
(INCSR) part II -- Financial Crimes and Money Laundering.

Begin Text:

Argentina is neither an important regional financial center
nor an offshore financial center. Money laundering related to
narcotics trafficking, corruption, contraband, and tax
evasion is believed to occur throughout the financial system,
in spite of the efforts of the Government of Argentina (GOA)
to stop it. The financial sector's gradual recovery from the
2001-02 financial crisis and post-crisis capital controls may
have reduced the incidence of money laundering through the
banking system. However, transactions conducted through
non-bank sectors and professions, such as the insurance
industry, financial advisors, accountants, notaries, trusts,
and companies, real or shell, remain viable mechanisms to
launder illicit funds. Tax evasion is the predicate crime in
the majority of all Argentine money laundering
investigations. Argentina has a long history of capital
flight and tax evasion, and Argentines hold billions of
dollars offshore, much of it legitimately earned money that
was never taxed.

The GOA took several important steps to combat money
laundering in 2006, including enacting amendments to its
money laundering legislation (Law 26.087) on March 29, 2006,
empowering Argentina's Financial Intelligence Unit ("Unidad
de Informacion Financiera" or "UIF"),creating a new National
Coordination Unit in the Ministry of Justice and Human Rights
to oversee and manage overall GOA money laundering efforts,
and creating a Special Prosecutors Unit within the Attorney
General's Office for money laundering and terrorism finance
cases. In addition, the Central Bank of Argentina (BCRA)
completed plans for a specialized bank examination unit,
announced in 2005, devoted specifically to money laundering
and terrorism finance.

These positive actions followed the steps the GOA took in
2005 to improve the effectiveness of its money laundering

regime, including the ratification of the UN International
Convention for the Suppression of the Financing of Terrorism
and the Inter-American Convention Against Terrorism, and
regulatory changes to improve its anti-money laundering and
counterterrorist financing systems. The Central Bank of
Argentina expanded its requirements for financial
institutions to check transactions against the terrorism
lists of the United States, European Union, Great Britain,
and Canada, in addition to the UN 1267 Sanctions Committee
consolidated list.

Argentina's primary anti-money laundering legislation is Law
25.246 of May 2000. Law 25.246 expands the predicate
offenses for money laundering to include all crimes listed in
the Penal Code, sets a stricter regulatory framework for the
financial sectors, and creates the UIF under the Ministry of
Justice and Human Rights. The law requires customer
identification, record keeping, and reporting of suspicious
transactions by all financial entities and businesses
supervised by the Central Bank, the Securities Exchange
Commission ("Comision Nacional de Valores" or "CNV"),and the
Superintendent for Insurance ("Superintendencia de Seguros de
la Nacion" or "SSN"). The law forbids the institutions to
notify their clients when filing suspicious financial
transactions reports, and provides a safe harbor from
liability for reporting such transactions. Reports that are
deemed by the UIF to warrant further investigation are
forwarded to the Attorney General's Office.

As of October 31, 2006, the UIF had received 2174 reports of
suspicious or unusual activities, forwarded 136 suspected
cases of money laundering to prosecutors for review, and
assisted prosecutors with 107 cases. There have been only
two money laundering convictions in Argentina since money

laundering was first criminalized in 1989, and none since the
passage of Law 25.246 in 2000.

On March 29, 2006, the Argentine Congress passed Law 26.087,
amending and modifying anti-money laundering Law 25.246, in
order to address Financial Action Task Force (FATF) concerns
regarding the perceived inadequacies in Argentine money
laundering and terrorism financing legislation and
enforcement. FATF conducted a mutual evaluation of Argentina
in October 2003. The mutual evaluation report was accepted at
the FATF plenary in June 2004 and at the plenary meetings of
the Financial Action Task Force for South America (GAFISUD)
in July 2004. While the evaluation of Argentina showed the
UIF to be functioning satisfactorily, it identified
weaknesses in Argentina's current anti-money laundering
legislation, as well as the lack of terrorist financing
legislation or a national anti-money laundering/counter
terrorism finance coordination strategy.

Law 26.087 responds to many of FATF's criticisms. It makes
five substantive improvements to existing law: 1) lifts
bank, stock exchange, and professional secrecy objections to
filing suspicious activity reports; 2) partially lifts tax
secrecy provisions; 3) clarifies which courts can hear
requests to lift tax secrecy requests, and requires decisions
within 30 days; 4) lowers the standard of proof required
before the UIF can pass cases to prosecutors; and 5)
eliminates the so-called "friends and family" exemption
contained in Article 277 of the Argentine Criminal Code for
cases of money laundering and narrows it for cases of
concealment. Overall, the law clarifies the relationship,
jurisdiction, and responsibilities of the UIF and the
Attorney General's Office, improves information sharing and
coordination, and reduces restrictions that have prevented
the UIF from obtaining information needed for money
laundering investigations by granting greater access to
Suspicious Activity Reports (SARs) filed by banks. However,
the law does not lift financial secrecy provisions on cash
transaction reports.

The UIF, which began operating in June 2002, has issued
resolutions widening the range of institutions and businesses
required to report on suspicious or unusual transactions to
the UIF beyond those identified in Law 25.246. Obligated
entities include the tax authority ("Administracion Federal
de Ingresos Publicos" or "AFIP," equivalent to the U.S. IRS),
Customs, banks, currency exchange houses, casinos, securities
dealers, dealers in art, antiques, and precious metals,
insurance companies, postal money transmitters, accountants,
and notaries public. The resolutions issued by the UIF also
provide guidelines for identifying suspicious or unusual
transactions. In 2005, the UIF eliminated a previous
resolution requiring obligated entities to report only
suspicious or unusual transactions that exceeded 50,000 pesos
(approximately $16,130); UIF Resolution 4/2005 now requires
entities to report all suspicious or unusual transactions
regardless of their amount. Suspicious or unusual
transactions are now reported directly to the UIF; prior to
2004, all suspicious transactions below a 500,000 peso
threshold were first reported to the appropriate supervisory
body for pre-analysis due to budget constraints at the UIF.
Obligated entities are required to maintain a database of
information related to client transactions, including
suspicious or unusual transaction reports, for at least five
years and must respond to requests from the UIF for further
information within 48 hours.

In September 2006, Congress passed Law 26.119, which amends
Law 25.246 to modify the composition of the UIF. In
particular, the new law reorganizes the UIF's executive
structure from a five member directorship with rotating
presidency to a structure that has a permanent, politically
appointed President and Vice President. Law 26.119 also
establishes a UIF Board of Advisors, comprised of
representatives of key government entities -- approved by the
Executive Power -- including the Central Bank, AFIP, the
Securities Exchange Commission, the national

counter-narcotics secretariat (SEDRONAR),and the Justice,
Economy, and Interior Ministries. The Advisory Board's
opinions on UIF decisions and actions are non-binding.

The Central Bank requires by resolution that all banks
maintain a database of all transactions exceeding 10,000
Argentine pesos (approximately $3,225),and periodically
submit the data to the Central Bank. Law 25.246 requires
banks to make available to the UIF upon request records of
transactions (equivalent of CTRs) involving the transfer of
funds (outgoing or incoming),cash deposits, or currency
exchanges that are equal to or greater than 10,000 pesos.
The UIF further receives copies of the declarations to be
made by all individuals (foreigners or Argentine citizens)
entering or departing Argentina with over US$10,000 in
currency or monetary instruments. These declarations are
required by Resolutions 1172/2001 and 1176/2001 issued by the
Argentine Customs Service in December 2001. In 2003, the
Argentine Congress passed Law 22.415/25.821, which would have
provided for the immediate fine of 25 percent of the
undeclared amount, and for the seizure and forfeiture of the
remaining undeclared currency and/or monetary instruments.
However, the President vetoed the law because it allegedly
conflicted with Argentina's commitments to MERCOSUR (Common
Market of the Southern Cone).

Argentina's Narcotics Law of 1989 authorizes the seizure of
assets and profits, and provides that these or the proceeds
of sales will be used in the fight against illegal narcotics
trafficking. Law 25.246 provided that proceeds of assets
forfeited under this law can also be used to fund the UIF.

Although Law 25.246 of 2000 expands the number of predicate
offenses for money laundering beyond narcotics-related
offenses and created the UIF, it limits the UIF's role to
investigating only money laundering arising from six specific
crimes. The law also defines money laundering as an
aggravation after the fact of the underlying crime. A person
who commits a crime cannot be prosecuted for laundering money
obtained from the crime; only someone who aids the criminal
after the fact in hiding the origins of the money can be
guilty of money laundering. Another impediment to
Argentina's anti-money laundering regime is that only
transactions (or a series of related transactions) exceeding
50,000 pesos can constitute money laundering; transactions
below 50,000 pesos can constitute only concealment, a lesser
offense.

Also in response to FATF concerns, as reported in the mutual
evaluation report, the Argentine government established a new
National Coordination Unit in the Ministry of Justice and
Human Rights, which represents Argentina to the FATF/GAFI and
GAFISUD, and has the lead in developing money laundering and
terrorism finance legislation, and manages the government's
overall money laundering and terrorism finance efforts.

Terrorism and terrorist acts are not specifically
criminalized under Argentine law. Because these acts are not
autonomous offenses, terrorist financing is not a predicate
offense for money laundering. In 2005, Argentina ratified
the UN International Convention for the Suppression of the
Financing of Terrorism and the Inter-American Convention
Against Terrorism, but it has not yet passed domestic
legislation. During 2005 and 2006, several bills were
introduced in the Congress to implement the provisions of
those treaties under Argentine law. Various ministries in
the government, as well as the "Comision Mixta" (Mixed
Commission -- comprised of the Central Bank, Congress,
Ministry of Economy, SEDRONAR, and Judicial branch),have
also developed draft counter terrorism finance laws.
Argentina's new National Coordinator is responsible for
reviewing and harmonizing the draft laws, with the goal of
completing a final draft for the President to submit to
Congress.

In the absence of legislation, the Central Bank issued
Circular A 4273 in 2005 (titled, "Norms on 'Prevention of

Terrorist Financing'") requiring banks to report any detected
instances of the financing of terrorism. The Central Bank
has regularly updated and modified the original Circular,
with the latest being Circular A 4599 (November 17, 2006).
Bankers complain that the regulation is not backed by any
legal definition of what constitutes terrorist financing in
Argentina, and that the absence of domestic legislation means
that they are not protected from lawsuits by clients if they
report suspected cases of terrorist financing. The Central
Bank of Argentina also issued Circular B-6986 in 2004,
instructing financial institutions to identify and freeze the
funds and financial assets of the individuals and entities
listed on the list of Specially Designated Global Terrorists
designated by the United States pursuant to E.O. 13224. It
modified this circular with Resolution 319 in October 2005,
which expands Circular B-6986 to require financial
institutions to check transactions against the terrorist
lists of the United Nations, United States, European Union,
Great Britain, and Canada. No assets have been identified or
frozen to date.

Working with the United States Department of Homeland
Security's Office of Immigration and Customs Enforcement
(ICE),Argentina has established a Trade Transparency Unit
(TTU). The TTU examines anomalies in trade data that could
be indicative of customs fraud and international trade-based
money laundering. The TTU will generate, initiate, and
support investigations and prosecutions related to
trade-based money laundering and the movement of criminal
proceeds across international borders. One key focus of the
TTU, as well as of other TTUs in the region, will be
financial crimes occurring in the tri-border area, which is
bounded by Puerto Iguazu, Argentina, Foz do Iguazu, Brazil,
and Ciudad del Este, Paraguay. The creation of the TTU was a
positive step towards complying with FATF Special
Recommendation VI on Terrorist Financing via alternative
remittance systems. Trade- based systems such as hawala
often use fraudulent trade documents and over and under
invoicing schemes to provide counter valuation in value
transfer and settling accounts.

The GOA remains active in multilateral counternarcotics and
international anti-money laundering organizations. It is a
member of the Organization of American States Inter-American
Drug Abuse Control Commission (OAS/CICAD) Experts Group to
Control Money Laundering, the FATF (or GAFI),and GAFISUD.
The GOA is a party to the 1988 UN Drug Convention, the UN
International Convention for the Suppression of the Financing
of Terrorism, the Inter-American Convention on Terrorism, and
the UN Convention against Transnational Organized Crime.
Argentina ratified the UN Convention Against Corruption on
August 28, 2006. Argentina has been a member of the Egmont
Group since July 2003 and participates in the "3 Plus 1"
Counter-Terrorism Dialogue between the United States and the
Triborder Area countries (Argentina, Brazil and Paraguay).
The UIF has signed memoranda of understanding regarding the
exchange of information with a number of financial
intelligence units, including Australia, Belgium, Bolivia,
Brazil, Chile, Colombia, El Salvador, Guatemala, Honduras,
Panama, Paraguay, Peru, Romania, Spain, and Venezuela. The
GoA and the USG have a Mutual Legal Assistance Treaty that
entered into force in 1993, and an extradition treaty that
entered into force in 2000.

With strengthened mechanisms available under Laws 26.119,
26.087, and 25.246, the ratification of the UN International
Convention for the Suppression of the Financing of Terrorism,
a reorganized UIF, and enhanced enforcement capability via
the Special Prosecutors Unit and Central Bank's specialized
bank examination unit, Argentina has the legal and regulatory
capability to prevent and combat money laundering more
effectively. However, additional legislative and regulatory
changes would significantly improve the anti-money
laundering/counterterrorism finance regime in Argentina,
particularly the passage of domestic legislation that
criminalizes the financing of terrorism. Additionally, to
comply with the latest FATF recommendation on the regulation

of bulk money transactions, Argentina will need to review the
legislation vetoed in 2003 to find a way to regulate such
transactions consistent with its MERCOSUR obligations.
Continuing priorities are the forceful sanctioning of
officials and institutions that fail to comply with the
reporting requirements of the law, the pursuit of a training
program for all levels of the criminal justice system, and
the provision of the necessary resources to the UIF to carry
out its mission. Additionally, there is a need for increased
public awareness of the problem of money laundering and its
connection to narcotics, corruption, and terrorism. Finally,
the new National Coordinator's Office should alleviate the
past problems of inadequate coordination and cooperation
between government agencies. It remains to be seen whether
the National Coordinator will be able to develop and
implement a national strategy on money laundering that would
link and coordinate GOA resources devoted to intelligence and
to counternarcotics and anti-financial crime efforts.

End Text.
WAYNE